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Will The Casino Come Marchin' In?

November 08, 1992

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WILL THE CASINO COME MARCHIN' IN?

Laissez les bons temps rouler--let the good times roll. Few cities do that better than New Orleans, where the historic French Quarter provides the backdrop for good jazz, spicy food, and risque fun. Now, the Big Easy wants to add casino gambling to the ambience. But even as Mayor Sidney Barthelemy prepares to choose a bidder for the city-owned casino site, lawsuits and other problems threaten to delay or block construction of what could be the world's largest casino.

The stakes are high for the four teams bidding on the project (table), which could produce up to $20 million a year in profits. Impoverished New Orleans has plenty riding on the deal, too. Hit by the collapsing oil industry in the 1980s, the city has struggled for years with budget deficits. The casino project is expected to generate at least $30 million a year in revenue for the city and create up to 12,000 permanent jobs. "It's the only thing we have left to stimulate the economy," says Barthelemy.

HURDLES. But the jackpot could still elude the mayor. Opponents have filed two separate lawsuits challenging the constitutionality of the casino, which was approved by the legislature in June. Casino foes say the constitution requires the state to "define and suppress gambling." The legal showdown, which should be resolved in the state supreme court by yearend, could also threaten Louisiana's numerous other gambling outlets--from horse racing to video poker. Plus, riverboat casino gambling is expected to get under way in 1994.

Legislators have tried to get around the constitutional language by defining these activities as "gaming" instead of gambling. "Until the legislature says something is gambling, it's not," contends the state's attorney, Leon Gary Jr. Still, the lawsuits can't be dismissed. "I don't think any casino operator will go forward with trying to build a casino until this is resolved," says C.B. Forgotston Jr., a spokesman for the plaintiffs in one of the lawsuits.

Those vying for the right to own and operate the casino face other hurdles. Just consider the convoluted bidding process. State law says New Orleans may have only one casino, to be located at the Rivergate, a little-used convention complex just outside the French Quarter. Since the city owns the property, Barthelemy is set to choose a leaseholder on Nov. 5. But the state will separately select and regulate the casino's operator. Thus it's possible that the city and state could award the contracts to two different groups. "We all wish this was done a little more cleanly," says Philip G. Satre, president of Harrah's Casino Hotels, which is bidding with partner Mirage Resorts Inc.

The winning bidders are also likely to challenge the state's hefty casino tax. The casino operator would have to pay the state 18.5% on gross revenue, or $100 million annually, whichever is greater. The tax rate on casinos in New Jersey is only 8% and a mere 6.25% in Nevada. The tax burden is one reason that Hilton Hotels Corp. and several others dropped out of the running months ago. If Mirage/Harrah's gets the nod, "we'll need to have discussions to see if we can make the environment more conducive to doing business there, or maybe we don't break ground," says Stephen A. Wynn, Mirage's chairman.

INSIDE TRACK. Wynn may not need to worry, even though his Mirage/Harrah's group won the highest rating from independent casino experts who evaluated the bids. Many New Orleans observers are placing their bets on hometown developer Daniel P. Robinowitz and his partners, Hawaiian resort developer Christopher Hemmeter and Caesars Celebration Park Casino. The team has forged ties with Barthelemy and Governor Edwin Edwards by hiring top advisers from both camps. "I'll be shocked if they don't get it," says Mitch Landrieu, a state representative and son of longtime former Mayor Moon Landrieu.

Rivals still insist that merit, not politics, will win the day. "We can't let it be a political decision," says Wendell H. Gauthier, chairman of the local investor group that's teamed with Showboat Inc. "Our future depends too much on this." Sounds like a big gamble--er, game.Stephanie Anderson Forest in New Orleans, with Ronald Grover in Los Angeles and bureau reports